Here's how tech, AI are transforming travel insurance

Half a decade back, travel insurance was taken mainly against loss of baggage or to compensate for trip cancellation expenses. But with marketplaces and travel aggregators providing comprehensive and competitive offers, insurance packages can now be compared, chosen and bought online. The flexibility and accessibility is expected to bring more takers and a rapid market expansion and growth.

"As per the General Insurance Council report, last year, it was a 950-crore industry for overseas travel insurance and this year, three years after the pandemic, the expected growth is between 15-20 pc," says Manas Kapoor, Business Head - Travel Insurance, Policybazaar.com, a leading insurance aggregator. With InsurTech booming, and Bima Sugam, a digital platform accelerating the awareness and demand, says Sanjiv Bajaj, Jt. Chairman & MD, BajajCapital Insurance Broking Ltd. "By 2025, the market could reach an estimated ₹40,000 crore, and in 2030, forecasts anticipate a staggering ₹1,25,000 crore market," he shares the projection.

The industry is largely around individual/family users who travel internationally once a year, prefer multi-trip insurance for cost savings and convenience. They combine floater plans with benefits that are mostly medical-related, and others like travel cancellations and loss of personal belongings. Single trips that come with flexibility and customisation are for millennials and Gen-Z cohorts and the senior citizen plans with higher pre-existing diseases (PED) coverage and lastly student-specific plans. There has been a significant drop in frequent flyers after the pandemic who opt for higher coverage. But domestic travel is picking up along with staycations and workcation plans. Especially after the IRDAI introduced new travel insurance guidelines, standardising coverage options and promoting transparency.

Micro-insurance plans and pay-as-you-go options that cater to budget-conscious travelers, cancel-for-any-reason coverage and additional add-ons are some of the emerging, popular trends in travel insurance.

Post-pandemic, consumer behavior has changed from traditional saver to spender, says Abraham Alapatt, President & Group Head – Marketing, Service Quality, Value Added Services & Innovation, Thomas Cook and SOTC Travel, "Our business split is 70% FIT (individual travel) and 30% GIT (group travel) for domestic, for long haul 75(GIT):25(FIT) and short haul: 50:50. Our individual travel/FIT segment is witnessing a steady growth in domestic and short haul compared to pre pandemic levels. The trending "YOLO" (You Only Live Once) mindset has been fueling the desire for experience/bucket list-led travel too."

Of all the pandemic outcomes, heightened risk perception has worked in favour of the insurance industry. "Over 90% of Indians now prioritise travel insurance," says Sanjiv Bajaj.

The challenges are still many and manifold. When it comes to insurance, people fail to read the 'deductibles' in fine print. As a result, there is an expectation mismatch; this leads to overconsumption too. Reading 600 pages of insurance document is impossible. Though service providers have dedicated domestic and global service providers to assist and chatbots to address the FAQs, transparency is considered to be a must-have for providers. "Unlike health, travel is a pull product. Complications might not result in good results," says Kapoor. Customer service, especially during the post sales journey is really important, he adds as much as tailoring the protection based on changing circumstances. "For example, in the last one and a half years, around Paris there are a lot of thefts reported and loss of personal belongings. Our recommendations prioritised this. Going ahead, in the pipeline is addition of a no-charge global call over the Internet to help. We are also trying to build a tech channel with responses for policy choices based on segmentation and deep-dive data," explains Kapoor.  

Technology indeed has given the insurance brands a progressive path to follow. For brands, it has resulted in a significant drop of approximately ten years in the average age of customers, says Alapatt. "Our live video connect platform has witnessed a growth of 2.5x compared to last year for seamless connectivity," he adds.

Most of the brands use the tech leverage to analyse real-time market trends and customer preferences and reach them too. "Especially, since competition is increasing with D2C platforms and travel aggregators offering bundled travel insurance options and competitive pricing," points out Sanjiv. From Google search campaigns, influencer marketing to YouTube, brands are focused on getting the most out of the burgeoning market.

In the last four years, the market has undergone a swift evolution and the take-aways are many. COVID is no longer a roadblock to the travelers. In fact, the post-pandemic time peaked last year with revenge-travels. From primary coverage, COVID now comes only as an add-on benefit in the claims.

"Historically, product construct in insurance used to be very static. But now there is an element of modularity. We see this in both travel and health insurance. Customers can plug and play and create the product themselves. It is a new move but we have yet to see how it will impact the industry," says Kapoor.  

"Government of India's UDAAN scheme strengthening domestic connectivity from various hubs, also connectivity to offbeat international destinations from India has expanded the gamut and scope," says Alapatt.

But in order to boost adoption and experience pronounced growth, similar to motor and two-wheeler insurances that are mandated, the industry consensus is for travel insurance to be made mandatory, especially for international travel.